Value of supply chain software 2004-4-23 China Third Party Logistics Network
The value of the supply chain management software can be measured from a lot of angles. One of the methods is to measure the asset return rate and increase income by improving operational and service levels by improving operational and service levels. This is the value of shareholders. Of course, this value also gives benefits to other members (employees, customers, suppliers) in the business. This article analyzes the value connotation of existing and developing supply chain software, and also proposes some guiding principles.
Suppliers of supply chain management software are marketing their solutions, rather than weighing traditional "cost savings". However, each company usually regards business software as part of the infrastructure required to carry out business, and to decide whether to carry out this investment in cost savings. So, how does a company dissolve into value assessment in its purchase analysis? At first glance, how the SCM app has arisen, this is not very clear. But their own value is true, then how do you measure it?
This article analyzes the value connotation of SCM software in detail. Evaluate the connotation requires understanding the following questions: supply chain activities have value, how much value is generated, how to measure this value. This discussion focuses on the value generation process. Explain how these applications produce value during your business process, where you can see the benefits of it. I left the quantitative problem of value to the EVA expert, and if I need some measurement indicators. The key point is: use a balanced method. When the value is evaluated, the eyes should not be short. Don't be limited to those that are easy to calculate.
What is the value?
Although value is conceptually very clear, it actually has many interests. In the economic field, we can think that as long as the return on investment exceeds the capital cost, it will be produced. On the other hand, the customer thinks that the service or product exceeds their expectations, it is considered value. If the product or service provided by the manufacturer exceeds the production information, the production process has produced value. Here we don't discuss "value" mean, I just pointed out several basic value characteristics of a big role in our discussion.
• Value is the purpose. The value is associated with other goals, which determines how various levels of decision makers evaluate various strategies. Focus on value affecting the decision process and behavioral assessment. Because the market is more competitive, shareholders have fully implemented their power, so management is the greatest value.
• Value can be produced at different levels of the company. Each company hierarchy has different variables and operational patterns to generate value. For example, a production manager may measure value by increasing material flow throughput and accelerated inventory turnover. The company manager will measure value in return of return on investment and income.
• Different members in the business process are different. As the company's different levels of understanding are different, they understand the value of value. In business relationships, there are many different value owners. Such as shareholders, customers, employees, suppliers. Based on quality and reflection, the employee measured by satisfaction. The supplier measures the value with the high visibility of the upper current demand model. Only by understanding different value levels and different members, the company can make a complete analysis of the value connotation of SCM applications.
What is a SCM application?
Typically, the supply chain management software application provides practical analytical systems to manage products and information through trading partners and customers' supply chain networks. This supply chain has a lot of functions, such as procurement, production plans, warehousing, transportation, demand forecasts, and customer services. Now, the SCM software market has been divided according to different stages, there are many software vendors in a particular field -------, for example, the production of advanced plans, sales groups, distributors transportation programs, etc. . However, there is a trend, that is, the different functions of the segmentation into a comprehensive set of supply chain plans. (Figure 1 depicts the existing market for SCM software. Figure 2 depicts a key activity connected to different applications). Figure 1 How does the SCM application creates value? The key to answer this question is to pay attention to the SCM application to define two words - "Analysis" and "Exotic". These applications are analyzed, which means they provide complex technical tools, such as advanced calculations and plan analysis to help managers make decisions and can operate more effectively. For example, the advanced plan model uses the algorithm to analyze different restrictions (materials, capacity, customer needs, etc.) to determine the most feasible production plan. With an accurate plan, manufacturers can eliminate huge buffers, such as excessive stocks and long standby. With advanced algorithms, and the ability to get new information, SCM applications facilitate the management decision process. Therefore, the flexibility and speed of operation are increased, which produces value.
At this point, the SCM application is a new type of business software. Software record and repeated transaction automation outside the shelf. These applications called an online transaction processing system (OLTP) first use business functions - financing, human resources, purchase order processing, material configuration plan - automation.
In the early 1990s, the business resource plan supplier of SAP and BAAN founded the transaction method, and the separated processing process was fused into a model. These whole methods provide a comprehensive backbone to synchronize different transactions in business. ERP software significantly reduces the entire cost, while making the company restarted business activities. But although the business infrastructure is strengthened, this software has been very small for the company's contribution to the company. In contrast to ERP, the supply chain management application software is more than just a transaction processing system, but in this sense, they record data and handle daily business tasks. However, through complex calculations and plan analysis, they can make managers to carry out water work, better understanding their strategic decisions. Supply chain software can help the production planner decide whether to accept the exemption order, it can also make the transport planner to determine the best way to transport, and help product managers accurately predict product needs, and allow procurement managers to conduct strategic parts. purchase.
SCM software not only makes good decisions, but also speeds up speed. Previously, the company was measured with the production plan cycle time in weeks and moon due to computational restrictions and incapacitated information. However, the advanced plan model overcomes these restrictions through complex calculations, and more information, and memory processing. Now the planning cycle time is measured in heaven, hour, and points. In addition, this also produces a competitive advantage - to send customers to customers at a faster speed, reflecting faster without predicted events. Now, the motto "time is money" has been verified.
Tomorrow: The company must adopt a broad point of view to understand the value. As software suppliers expand their product portfolio to provide more comprehensive products, the SCM program platform changes faster.
The company has also accelerated a supply chain program involving the entire enterprise range. The expanded product portfolio needs to have extensive analysis of these applications where value. At the same time, new assessments are also required. At least four main trends determine the value assessment of the supply chain management program:
1. The emergence of a comprehensive planning program facility. Many suppliers are now expanding their product portfolios through different functional areas of the entire supply chain program. Supply chain intersections integrate supplier planning, production plans, logistical plans and demand plans. These solutions provide a new point of view to supply chain activities, making the upper manager make a better and faster make decision.
2. Business functional increase. Supply chain software will soon cooperate with other business functions, such as financial management, product cycle management, and employee management. As Eregs vendors are in the same completion and different functions in the transaction level, the supply chain management supplier will work to manage the analytical processes of the business. Since other business functions are compressed into the supply chain program, the managers in these functional fields will finally become the direct user of the software. For example, the profitability analysis of the product combination can be combined with the demand plan to determine the product to market marketing.
3. Strategic planning. These applications can help upper managers make decisions about additional investment, such as warehouses and manufacturers. The strategic program also provides guidance for where investment. As shown in Figure 1, the strategic plan software already exists in the platform, however, most of these software packages have not been well integrated with the operation plan software. This situation is changing because these planned software parcels are transformed from the design network to help people make faster and better decisions. 4. The emergence of collaboration between enterprises. Collaboration needs to work together for the previously handled business processes. For example, manufacturers and retailers may make a prediction of each product species to get the best results. Suppliers and manufacturers can cooperate to develop a new product. In fact, supply chain management comes from trading partners and extension partners, and cooperates together to meet competitive advantages. Now, collaboration is mainly implemented by telephone, fax, email, and EDI networks. However, software program suppliers are developing complex technologies to support collaboration networks, which can be synchronously processed in extended trading partners. The Internet is the main tool to achieve this level of collaboration.
These trends in the supply chain management program application means that companies need to broaden their analytical ranges, including other functional areas, such as financial sectors, and wider corporate partners. The extension analysis must include different components in the supply chain. The following will be analyzed one by one.
How can SCM software add value to financial management departments?
First, this problem sounds some ambiguous two. How does the SCM program for production and management have impact financial management. The answer is to improve the operational efficiency, the SCM program is indirect to make the company's financial sector more flexible, and give financial managers more freedom to operate.
The value of supply chain technology is not newly proposed in the financial sector. But not only from the perspective of business managers, this problem is new. When the business manager focuses on expanding its business by increasing sales and profits, financial sector managers should consider how financial support. The company usually requires additional resources when expanding the business, which requires a wide range of funding sources. Financial managers must have effectively operated capital, analyze investment opportunities to determine the best way.
Understanding SCM software's impact on financial functions is to analyze three public familiar financial data: balance sheets, cash flow meters, income projects.
Asset and liability management: The balance sheet provides all the company's assets and liabilities. It plays an important role in analyzing how to support growth because it records various resources and related financial data. The balance sheet divides assets into short-term operational assets, such as inventory and long-standing assets, such as factories and equipment. Financial managers must effectively balance the cost of various assets to lose their future investment opportunities.
In short, an important measure is a non-cash turnover, which is defined as an existing asset - existing liabilities - cash. This measures how much funds need to make up for daily costs to maintain liquidity. The less the capital is, and more funds can be used in investment. Moreover, reducing existing assets (such as inventory or receivables) or increasing existing liabilities (payable) can reduce the need for net turnover funds. We have analyzed how the SCM program reduces inventory. Now we analyze how they affect cash turn. A more reliable service support for supply chain technology allows customers to increase their satisfaction, then companies can be more advantageous when negotiating prices and signing contracts. For example, customers with high satisfaction may be more willing to pay more of the first payment, which reduces receivables. Similarly, more strategic relationships with suppliers can enable the company to expand its payables. Long-term perspective, better asset operation and scale management can reduce investment in fixed assets. Combined with better demand to reduce additional investments of fixed assets and use capital for other strategic development. SCM technology provides the necessary infrastructure to support creative cooperation opportunities, such as outsourcing, which can reduce capital assets. An obstacle to outsourcing, especially logistics outsourcing is the company's lack of correct way to track stocks. This is difficult to reflect and implement the sending plan for the customer. Today, many supply chain plans provide the necessary infrastructure to make real-time inventory possible, which expands the opportunity of outsourcing.
Cash flow management: Financial sector managers must manage cash flows because profit may not produce necessary cash to support growth. The cash flow table records the inflow and flow of cash during a period. However, just like the company's assessment of turnover funds, they also evaluate excess cash after giving various investment financing. Excess cash is defined in this: net income depreciation and distribution - capital cost net turnover changes.
In some ways, these excess cash represent the value of the owner. Managers can invest these excess cash in other aspects, such as purchasing stockings, repaying debts, and increases dividends. A company can increase net income or reduce turnover funds to increase cash flow.
Revenue management (income project) per share. Revenue management is critical to every company. Investors will continue to benefit from investment as a measure of investment. It has a negative impact on the company's value. But the real world is extremely complex. There is no expected order, which affects seasonal income, and the change in component prices makes costs extremely difficult.
SCM technology can help companies manage their income in an uncertain environment. In a good period, they can use the optimized cost structure to promote revenue growth - that is, income growth exceeds the cost. In a bad period, they can provide a direct window for supply chain costs, which is convenient for unnecessary cost, and the impact on customers is minimal. The final result is to match the analyst's expectations.
These disclosed financial reports attract analysts and potential investors. Analysts identify the company's current financial operations to the past. In order to standardize assessment, many analysts use the ratio to measure the ability of a company that can generate potential investment. Companies can attract investors relative to the financial ratio. Capital Rate (ROE) is a common ratio for analyzing the company's capacity, which has been used in SCM software.
ROE is very common because it measures the return rate of owners' investment. It is equivalent to net income / sales X sales / assets x assets / capital. Analysts like it because it includes different leverages, managers can use it to improve their returns. These leverages include increasing net income (net profit margins) relative to sales (net profit margins), which can achieve the right level of financial risk (financial leverage) with respect to capital increased assets relative to assets. The first two leverages, net profit margins and asset turn, equal to ROA, which was previously analyzed. Below to analyze the third leverage, financial leverage (asset / capital). When a company grows in growth, it needs to invest in new assets - plant, equipment, and warehouse. In order to seek financial support, it can increase new capital (such as issuing stocks) or borrowing debt. If the company increases the asset base through liabilities, the leverage is increased. Liabilities have a lot of benefits compared to capital. The first liability interest can offset part of the income tax. On the other hand, it will not dilute the equity, that is, the increased income is the current stock holder. But liability financing is risky because interest must be paid on time. At the same time, each company has a limitations of borrowing ability, so the financial leverage cannot achieve a high level. This is determined by two points, the lender refuses to give it more loans, and there is not enough cash to pay interest.
The SCM program cannot help the company decide what level of financial levers. However, they can give company managers more confidence, which has greater flexibility when making financial decisions. This software can provide full visibility of the benefits, making the company bear greater interest rate risk. In addition, the application of the supply chain technology improves the level of operation, which can produce more cash inflow to repay the debt. Further, the high quality of the benefits can cause the company to lower the loan interest. These factors can reduce the cost of liabilities, which allows the company to enjoy the benefits of financial leverage.
Company joint value
When the sector manager focuses on such as capabilities, operational benefits, and customer development, company managers are more concerned about new business revolution, mergers and acquisitions. Of course they pay attention to the operation of the entire business. Compared to the value of the value of the SCM program also involves these aspects. One is mutual analysis, one is to develop a newly developed business strategy.
Mutual offset analysis: Unfortunately, the role to be fully played must be at the expense of the other aspect. For example, in order to reflect more sensitive to customers, this usually needs to increase inventory through distribution channels or frequent production processes. The company may be A level in terms of customer reflection, but in inventory management and production costs are C-levels. The company's high-level managers must consider the various relationships involved in the decision, thereby developing the best strategy. The biggest benefit of the whole and supply chain management is that it provides a high degree of visibility, which can be an assessment of different aspects - for example, considering the enhanced customer service and considering additional inventory levels. With this high visibility, the company's managers can do better when analyzing important strategies. These advanced software also provide planning tool to help determine the best action. Innovative business strategy. SCM software not only strengthens the management of existing business processes, but also helps companies transform these processes into competitive advantages. The company's strategic analysts often use new business practices as a means of highlighting the company. The best example is that recently, Dell introduces the Build-to-Order production method into the computer industry. The SCM application makes process innovation by supporting more flexible and purposeful operations, and this does not need to sacrifice other operations. For example, by distributing channels and more powerful techniques can be better controlled for the flow of goods by distribution channels, so that the company can assemble the final product in the distribution center. Realized the interests of both parties. The company has improved the level of delivery while meeting customers. The improvement of customer satisfaction is not accompanied by increased inventory increases and production costs. Consider all partners have many different partners or owners when they are doing a business. Every party has different views. High-level managers are most concerned about increasing the income of stockholders. They are most concerned about the value added and dividend of stocks. There is a very close relationship between stock value changes and ROE and revenue growth in previously discussed. The administrator can use the SCM application to increase these financial indicators, that is, the stock value can be increased.
Some viewers now believe that the company should extend the range of value owners, including not only the stock holders, but also other people in the business process.
Employees: The satisfaction of employees is usually ignored. Typically, business software innovations focus on meeting a civilian staff - they are the need for business operations every day. Few concern about knowledge workers - the needs of the managers who make strategic and planned decisions. The SCM program is the first program for these managers. Their effective operation can produce greater satisfaction and knowledge conversion in these key working groups.
Customer: Customers decide whether to make a business in accordance with many factors, such as: product quality, functionality, slow, service level, reliability, and time, etc. The SCM program helps the company to meet the different requirements of our customers. In general, these applications support such a full range of environments, which can drive production processes through its actual customers. From a strategic, the software's real-time analysis capabilities, plus its powerful technical features, which allows the company to produce products according to customer requirements, and meet customers faster. This ability improves customers' satisfaction and attracting more customers. More importantly, customers are willing to provide a certain fee for this kind of preferential service.
Supplier: Supply business is a key factor in providing business needs in a limited time. A great challenge facing the supplier is the volatility of demand models, and they don't simply understand the end customers. To achieve this, the supplier usually has buffer stocks and increases waiting time. Therefore, there is a high cost, increasing turnover funds and lost some customers. By supporting collaborative predictions and production plans, SCM programs have eliminated volatility, that is, providing vendor value.
"Supply Chain Value" - the next area to develop
The discussion of SCM software is mainly carried out from the company's perspective. However, a main purpose of supply chain management is to make all trading partners in the chain --- from end customers to the most startup supplier. The next step is to extend the scope of our value assessment, including partners of other supply chains, are included. The supply chain value represents an example conversion and requires new metrics and value proposals, considering the entire expansion enterprise. A key supplier has a key supplier to create a strategic relationship. As part of this relationship, your company can negotiate a better interest rate level with suppliers because you show a strong demand for its products. Low interest rates reduces fund cost, which allows you to strategically investigate the activities added to your business.
How do you quantify the SCM program by expanding the business value from you? The pioneer in the next generation of supply chains has not been developed, just started to study this problem.
